explain tax refund?

[swynx]

So I'm 21 and I know nothing about how taxes work. Other than that I work hard and they take roughly 23% of each check. When I calculate my check early in the week I subtract 30%. 7% for my retirement and 23 for taxes. Gets me within 50$ every check without overtime.

I almost always work 25 hours of overtime a week. So 65 hours a week / 130 per check. My friends say "you'll get raped now, but tax time will be awesome" about a month ago I worked alot of overtime. 13 of 14 days in the pay period at 12 hours a day. My taxes were more than my normal paycheck.

Used turbotax refund calculator and to date it says ill get like 3300$ online it says the average refund is within 3 grand +/- 500$. Thought only people with dependants got alot. Like my single mother raising 2 kids... she got like 5500$ Every year.

Myself I though I might get like 800$ thinks its alot more? Were like half way to tax season. . I think?

 

[swynx]

Also why do some people not do taxes? My girl friends dad raised her and 2 boys by himself and claims he's never filed for taxes. If you get money back why not? And I also thought you got penalized or some crap if you don't file. I mean my girl friends mom got 10 grand back. Idk How? maybe she was sellin crack at the time.

Uncle Sam is confusing.

 

[adsm08]

The tax refund is a the product of a broken system that can't figure out in advance how much you should be taxed (seems like a pretty simple thing to figure out to me). This means they "budget" (good joke, right) off of amount X, but then at the end of the year they end up paying back a bunch of the money they already spent, even though the starting amount wasn't enough to pay all the bills anyway.



Anyway, your refund is based a lot on how much you can deduct at the end of the year, donations, tuition, interest, and other allowables. Two of the last three years my returns have been close to 10K. One year my wife and I were both in school and got tuition credits, the next we bought a house and got a big credit for that, plus her tuition credits.

 

[swynx]

Right. I was unaware that it was money they borrowed. Just thought it was a you have to dont ask questions type of deal. When I was a kid I had to do counseling since I have/had Adhd crap and they kept like all there receipts for taxes. I was like wtf.

I saw all the tuition stuff on the calculator. Just wasn't sure if real working people actually got decent amount of cash. Only knew that single moms for whatever reason got lots.

 

[JoshT]

Single folk with no dependants get raped on taxes. If you're lucky you have write offs like education expenses. I just ran out of my last education deduction, this year is going to suck.

 

[swynx]

I have some school loans just haven't started paying them.

 

[bmerr98]

Personally, I'd much rather replace the income tax with a national sales tax. Not everyone pays income tax, but every crackhead and hooker out there has to buy something now and then.

However, if we must have an income tax, I'm an advocate of the flat or fair tax system where every one pays the same percentage no matter what their income is. You shouldn't be taxed at a higher rate just because you have a higher income. Why punish success? The wealthy guy will still pay a larger amount, but the proportion will be the same.

Dude A makes $30k a year, Dude B makes $100k a year. Tax rate flat at say 10% just for a nice round number. Dude A pays $3000 in tax, Dude B pays $10,000 in tax. How would that not be fair?

Now under our current system, people who make under a certain amount pay no income tax, while higher income earners end up footing the whole bill for everyone else, with the "reasoning" being that they can afford it cuz they're "rich". Sounds like there might be some incentive for some to not succeed so they don't have to pay taxes.

The rule of thumb is tax what you want less of, subsidize what you want more of. Now look at what is taxed and what is subsidized in this country and see what our Government's priorities are.

 

[bmerr98]

Right. I was unaware that it was money they borrowed...

Here's the thing...the money you get as a "refund" was borrowed from YOU! It's YOUR money that you could have had all year to help out your budget, buy groceries, parts, pay rent, buy gas, etc. But, because we allow the Government to take more each check than we need to, we essentially are giving them an interest free loan every month. Then when we get a big tax return we act like Uncle Sam is doing us a favor by sending us a check.

If you'd rather keep your money to use through the year, just divide the amount of your tax return by the number of paychecks you get per year and have the payroll person help you adjust your withholding by that amount. You should come out pretty close to even.

Or, if you like the big check in April or whenever, do the withholding adjustment and put that money in a savings account or something that will at least draw a little interest.

 

[tmcalavy]

And whatever you do, DON'T SPEND IT ALL. Like he said, adjust your withholding and put the saved difference into a savings account that makes you money. You will get better opportunities as you go along in life...job, house, wife, kiddos...but you gotta have some cash to take advantage of some of those opportunities. Like moving for a better job/life. It sux when opportunity falls in your lap, but you can't afford it.

 

[HAPPY+RANGER+GUY]

...but you gotta have some cash to take advantage of some of those opportunities. Like moving for a better job/life. It sux when opportunity falls in your lap, but you can't afford it.

Very wise man!!

When you don't have the cash flow available you can very easily box yourself into a corner with no way out. And then the real trouble begins!! And it goes south from there.

 

[HAPPY+RANGER+GUY]

Uncle Sam is confusing.

This will always be the case and you can bet your bottom dollar some of the confusion is intentional.

 

[swynx]

Got a nice enough chunk of change in a bank account I never need that I only use for emergency funds. Large enough that I could pay all my bills for 2 months. And by then my works STD plan would kick in

 

[cvar]

The IRS also insists that you pay them ongoing, during the whole year, at least 90% of your taxes due. If you don't, and instead pay up only at the end of the year, then they issue an extra penalty. Ouch!

So you should guesstimate your personal sweet spot, and have that much deducted from your weekly paycheck, up front. Your employer has a form you can use to adjust this, up or down.

If your income is around the poverty line, then you don't have to file taxes. Form 1040 explains that. And if you are above their threshold, then you must file, whether or not you owe them some tax. They don't forgive this sin. Tax evasion is stupid. Square up yearly, and stay outta jail.

Oh, and I like that suggestion of saving some $ aside, just in case. Pace your spending habits, if you can.

 

[tmcalavy]

Way cool that you gotta emergency fund...keep adding to it. I don't like the tax system, but we gotta pay for welfare babies some way or another, so I don't mind getting some back after tax time (April 15) as a refund cause I'm always short one way or another at that time of year. But it chaps my arse that those that don't work can wrangle a refund...I also favor a national flat tax, like a sales tax. If I remember right, the income tax started off as a temporary thing that was supposed to help finance new equipment, etc., for the military back in WWI but it never got repealed...the douche's in Washington got a taste of voting themselves raises and more of our money and they won't let go of it now for anything.

 

[adsm08]

.the douche's in Washington got a taste of voting themselves raises and more of our money and they won't let go of it now for anything.

http://conventionofstates.com/